Secondary Health Insurance

General Questions
#1

Short question: Assuming that both policies are free, can having a secondary health insurance policy be detrimental?

Long question: I have good health insurance coverage for my family, paid for by my employer. My wife is starting a new job, and her new employer will pay for a high deductible plan for her. Reading online about “coordination of benefits,” her insurance will become primary for her and mine secondary. One explanation I read said that the second policy would work just like before. However several sites say that “both policies’ deductibles must be met”. Does this mean her several thousand dollar primary policy deductible must be met before the secondary policy will pay? Will she effectively be peanalized for taking the insurance?

#2

High deductible plan often means there is an HSA attached, and she would not be eligible to use that if covered by you in most cases. Exceptions are if she only gets dental etc. See IRS Pub 969.

#3

I know that she isn’t eligible for an HSA. I just want to know if a primary insurance plan can hurt your benefits on the secondary.

The rest of the story: The way we understand it, her company will give her $500 towards a health plan. One of the high deductible plans is about $400. It is my understanding that they will still give her the $500 even if she enrolls in the $400 plan (I have my doubts, but HR said so. I think they will just cover the $400.). We could pocket the extra $100. If she does not enroll in a plan, no $500 at all.

#4

It is difficult to imagine that the language in the primary plan has any bearing on the language or coverage in the secondary plan because they are independent contracts of insurance. To determine what the secondary plan covers, including any deductible from the primary plan, I suggest reading the policy or contact/email the secondary plan insurer and discuss.

#5

Two things:
First, generally YOU don’t get to pick which policy is “primary” and which is “secondary” - the plan documents and the employer does. So entirely possible that the insurance you want to be “secondary” will actually be the primary insurance for one of you and if you try to force it the wrong way you’re in for a world of paperwork and retro-active denials of coverage and such.

Second, having two policies can cause paperwork headache as the two companies fight things out even if you do have the right primary and secondary insurance set up.

Edit I see on further reading you mentioned that it would become primary, so that part is redundant I guess. But the proviso about dealing with more paperwork is definitely something to be aware of.

#6

What kind of employers offer free health insurance? Usually there’s a payroll deduction for part of the cost.

#7

She doesn’t get a HSA at all, in any situation? Or you know she wouldn’t with secondary insurance? I wouldn’t throw a HSA out the window. They just gave my free money, not going to balk at that.

I certainly get it deducted from my payroll, and not germane to the OP, but it doesn’t cost me any extra to add additional family members beyond the first.

#8

Is your coverage high deductible? I assume not.

You could ask your insurance people what would happen in this specific scenario (wife sees doctor, has to pay out of pocket because of high-deductible plan, then files with them as secondary).

For next year, consider whether dropping her from your policy, and having her just use her own, would make sense financially. I believe she could then get her own HSA.

To figure out whether a HDHP+HSA is worth it, look at your expenses for this year (or last year) and see whether it would be cheaper, net, to go with the high deductible plan. My take on those is that they’re great if you have a lot of expenses, or very few.

Note that the family deductible and out of pocket limits are typically (always?) double that of one person. If you have a deductible of 2,000 each, then the family deductible would be 4,000. If each member of your family spends 1000 on care, then you’ve met that deductible then insurance starts to kick in. If your out of pocket limit is 3,000, then the family OOP would be 6,000. So - what that means is if you’re going to go with a high deductible plan at all, you’re definitely better off with one that covers the whole family. In that scenario, your wife having her own as primary (with you keeping the kids on yours) would definitely be detrimental… as she’d have to meet her deductible (say, 2,000) and you’d have to meet 4,000 because it’s you and the kids. So, 6.000 vs 4,000.